Walters Kluwers provides software solutions for tax and accounting firms. One of its solutions is CCH Validate, which uses blockchain. A critical step in any audit process is to verify bank balances shown in the accounts. Auditors can’t rely on paper-based statements or pdfs because they are too prone to fraud. So, they have to get confirmation directly from the bank.
Hence, it makes sense to use blockchain. Not only is it possible for auditors to cryptographically verify the data from a bank, but it’s also possible to be reasonably sure it hasn’t been tampered with. Walters Kluwer claims its process is patented. We thought this workflow needed to use blockchain for years, so we can’t comment on the patent’s novelty.
Why don’t custodians provide something similar?
However, another set of functionalities should use a similar process. Many stablecoins and tokenization projects involve assets being held by a custodian. Daily or weekly, one could query the custodian balances cryptographically, using blockchain to ensure there’s no tampering.
One example is the public blockchain firm Ondo Finance which tokenizes Treasuries amongst others. One of its products, the Ondo Short-Term US Government Treasuries OUSG, has $109 million in market capitalization. It publishes self-attestation reports daily and a printout from NAV, the fund administrator. As much as that might provide confidence to some people, for an accountant, that’s like being on a different continent from having a custodian attest that it’s holding the ETFs that underpin the token.
We’ve been watching Ondo for a while, and we haven’t seen an attestation from a custodian, although perhaps we missed it.
Now, if custodians provided blockchain-based attestations of the assets they hold on a weekly or monthly basis, that would give token holders the confidence needed for a market to get real traction.
